McClaren v. Franciscus

• Decision Date: 31 March 1869
• Citation: 43 Mo. 452
• Parties: JAMES M. MCCLAREN et al., Respondents, v. JAMES M. FRANCISCUS, Appellant.
• Court: Missouri Supreme Court

43 Mo. 452

JAMES M. MCCLAREN et al., Respondents,

v.JAMES M. FRANCISCUS, Appellant.

Supreme Court of Missouri.

March Term, 1869.

Appeal from St. Louis Circuit Court.

At the October term, 1868, plaintiff below filed a motion against defendant and several others, jointly, alleging that on March 16, 1868, they recovered a judgment against the “St. Louis Museum, Opera, and Fine-Art Gallery,” averring that it is a corporation incorporated and organized under the laws of this State in regard to corporations; that the judgment is unsatisfied, and an execution and been issued against the property of the corporation, and no property could be found whereon to levy; that appellant and the other defendants below are and were stockholders in said corporation at the time of the incurring of the indebtedness on which said judgment was rendered. Wherefore they asked for an execution to issue on said judgment against said stockholders. At the trial the motion was dismissed as to all of the defendants except the appellant.

The following facts appeared in evidence. The respondents, McClaren and Robison, were original subscribers for twenty shares of stock in the company, and Yeates and Henderson were original subscribers for twenty-eight shares. Respondents, McClaren and Robison, made a contract with the company to make a plan and drawings for a building for it, and perhaps some other services, for which they charged $3,500, and agreed to take stock in the company therefor to the amount of $2,000, the balance to be paid in money. They subscribed for the $2,000 of stock on the company's stock books, and had the certificates therefor issued to them. Their work was completed by or before October 1, 1866; and the indebtedness of the company to them had then accrued. In October, 1866, respondents sold their twenty shares of stock to Yeates and Henderson, and were paid for it, and transferred the stock to Yeates and Henderson by assigning and delivering the certificates to them. Yeates and Henderson, in November, 1866, sold these twenty shares of stock, together with the twenty-eight shares which they held by their original subscription, to appellant, received pay, and transferred the stock to appellant by assignment and delivery of the certificates to him. Appellant then gave up to the secretary of the company the certificates so assigned to him, and got him to issue a new certificate in lieu thereof to him, in December, 1866. There never was any transfer of any of this stock on the stock book or any book of the company. Appellant, instead of holding the certificates with the assignments on them, took a certificate to himself in place of them. On the 14th day of January, 1867, appellant sold the forty-eight shares of stock thus purchased to George De Baun (the witness), and transferred it to him by assigning and delivering the certificates therefor to him, and they proved that from and after said 14th day of January, 1867, De Baun had been and still was the owner and holder of the stock. The stock was all finally-paid-up stock, and was purchased and sold by the different parties as such.

On the trial De Baun testified: “The building burned down after the stock was transferred to me, and a judgment of $1,000 could not have been enforced at the time by execution against me, nor since. I gave Franciscus my note at ninety days for this stock, and intend to pay it when I can. Since I became insolvent Franciscus loaned me money and traded with me. Franciscus knew I was insolvent when he sold this stock to me.”

Upon this evidence the cause was left with the court, when judgment was given for plaintiffs. Defendant asked for a new trial, which was refused, and he appealed to the general term of the St. Louis Circuit Court, where the judgment was affirmed. The case now comes here on appeal. The other material facts appear in the opinion of the court.

Sharp & Broadhead, for appellant.

I. The first point prominently presenting itself by the record is that the liability sought to be enforced does not exist against the stockholders of the “St. Louis Museum, Opera, and Fine-Art Gallery.” It nowhere appears that such company (if a corporation at all) was created after the taking effect of our present constitution, or whether it has or has not been in existence for twenty years. There is no averment on that subject; there is no proof on the point; indeed, there is no evidence proving it to be a corporation at all. The present constitution (art. VIII, § 6, p. 40) for the first time imposed, or required legislation to impose, the liability in question. The law of 1865 (Gen. Stat. 1865, p. 328, § 11) provides for the enforcement of this provision of the constitution. It applies only to corporations created under the present constitution; it does not and cannot create and impose this new and additional liability on the stockholders in corporations existing prior to the constitution and law imposing it. (Wheeler v. The Frontier Bank, 23 Me. 308-10; Middletown Bank v. Reef, 3 Conn. 135, 139.)

II. Franciscus was not the holder or owner of stock therein at such a time to be liable for the debt sought to be enforced. The persons who are stockholders at the time the debt is contracted are the ones liable for such debt. The provision of the constitution is that dues from private corporations shall be secured by such means as may be prescribed by law, but in all cases each stockholder shall be individually liable, over and above the stock by him or her owned and any amount unpaid thereon, in a further sum at least equal to the amount of such stock.” The provision of the statute is that if execution shall have been issued against the property of a corporation, and there cannot be found property whereon to levy such execution, then execution may be issued against any one of the stockholders to an extent equal in amount to the amount of stock by him owned, together with any amount unpaid thereon; providing, however, that there shall first be a suit, judgment, and execution against the corporation, and a return not satisfied. All of the provisions of this constitutional liability, and of the sections of the statute for its enforcement, seem to be sufficiently clear of themselves; but a question is raised here as to who are the stockholders who are made liable for a debt contracted by the corporation. It is he who is a stockholder or owner or holder of stock when the debt of the corporation is contracted or made, and who gets the benefit of it, and under whose management it was made, and on the credit of whom and on the faith of whose liability as a stockholder the creditor gives credit to his company? Or is it he who had once been a stockholder, before the debt was created or contracted, but who had ceased to be, and had no further connection with the company before the debt? Or is it he who was not a stockholder or in any way connected with the company at the time of the transaction, or at any time before, but who purchased stock long after the debt had been contracted and had become due, and could not possibly have had any agency in the matter? Plaintiffs and their counsel, when they commenced this proceeding and until their own evidence forced them from it, seem to have thought it was the stockholder at the time the indebtedness was created who was liable for it. For in their application, which is the basis of this cause, they aver that Franciscus was a stockholder at the time of the incurring of the indebtedness to plaintiffs, and still is such; and it was after their evidence clearly proved that he was not and never was a stockholder until after the debt was contracted and became due that they claimed that the subsequent purchaser of their stock was liable to them for a debt created by them and their associates. It was on this theory that the judgment herein was recovered. The language of the constitution and statute does not admit of the construction forced upon them in this case, and it is doing violence to them to so construe them. Indeed, it is at least very questionable whether it would be competent for the Legislature to enact that one man should pay the debt of another in this way, which he has never contracted to pay, merely because he has subsequently purchased the stock of him who contracted it or was liable for it. (23 Maine, 308.) This liability is not a penalty; it is a quasi partnership liability, limited as to extent and mode of enforcement. All the authorities hereinafter referred to, and indeed all of the decisions, so hold. Suppose ten persons are partners; they contract debts; one afterward sells his interest in the assets and effects of the firm to defendant, and is paid in full for it: the original partner, at the time the debt was created, is liable for such debts, and, even if he has expressly contracted for his vendee to pay them and hold him harmless therefrom, he is still liable to the creditor, and his vendee is only liable on the contract of indemnity to him. In the absence of an express contract, there is no sort of liability on the vendee, even to him; and the creditors of the company cannot, without their consent, be turned over to the vendee, who may be insolvent, and the contract and liability of their debtor impaired or released. The same principle applies to the indebtedness and liability here: A man assigns a non-negotiable note. What is the legal effect of his assignment? The holder must sue, get judgment, execution, and return of nulla bona. This proves the insolvency and fixes the state of facts on which the assignor must respond on his liability incurred by the assignment; not that his liability was created on the insolvency of the maker being established by the return of the execution nulla bona, but it is thereby established that the liability incurred by the contract of assignment was matured and must be met. So with the question before us. The plaintiffs subscribed for and owned stock in the company. While such...